Chicago's largest operator of assisted living homes for the poor was looking to grow its business when it decided to add a new member to its legal team: the law firm of House Speaker Michael Madigan.
Within months of that decision, the most powerful lawmaker in Illinois and the chamber he controls voted in 2005 to create a state program that would send tens of millions of dollars to his new client.
Weeks ago, the same client caught another break when a legislative panel advised by top Madigan aides rejected an idea that could have killed its latest venture, a new care center in Lake County.
The case of Pathway Senior Living LLC illustrates how Madigan's public actions have repeatedly benefited his private clients.
As he balances who wins and who loses in the state's struggle to pay the health care bill for its poorest citizens, Madigan made decisions affecting the fortunes of many companies that put money in his pocket. Nursing homes, pharmacies and other assisted living companies in recent years all have hired the property tax law firm where he is the rainmaker-in-chief.
When the House and Senate last week passed a measure to cut Medicaid spending by $1.6 billion that was written by Madigan's office, just a week before the end of the spring session, all those industries were able to avoid the worst of the proposals that targeted them.
The convergence of Madigan's public actions and private business — in a Statehouse where key decisions are shrouded in secrecy — troubles ethics experts interviewed by the Tribune. The newspaper has previously reported that clients of the speaker's tax law firm, Madigan & Getzendanner, have benefited from state projects he helped secure.
Madigan's solution to such situations is a written personal code of conduct that in part says if a client of his law firm expresses an interest in legislation "such as to create a conflict of interest, I recuse myself from consideration of the bill."
Pressed to square his involvement in legislation affecting his clients with his code of conduct, Madigan spokesman Steve Brown said that when the speaker takes action affecting an entire industry, any benefits to his clients do not constitute a conflict. That includes Madigan's vote to create the assisted living program.
"It benefits a whole range of entities across the state including a business that his law firm does the property tax work on," Brown said.
Madigan declined to be interviewed but issued this statement about the Tribune's examination: "The overall approach looks like more garbage from the two garbage haulers who work for a bankrupt company."
Ethics experts describe Madigan's actions as a prime example of why states need stronger ethics and disclosure rules.
"It seems ludicrous to me that he would even suggest he is pushing for legislation that benefits his clients without regard to the interests of those clients," said David H. Laufman, a former federal prosecutor who also served as investigative counsel to the U.S. House Ethics Committee.
"He has worded his code of conduct to be consistent with the way he does business so that he can posit that he is avoiding impropriety," Laufman said of Madigan. "It is full of ambiguity and raises all kinds of questions that call for elucidation by Mr. Madigan on what he thinks constitutes a conflict of interest."
State law does not require Madigan to disclose his income from the law firm. As speaker, he makes decisions behind closed doors, declining to provide any documentation about his contacts with lawmakers, corporate interests and lobbyists.
Illinois' leading reform advocates have called for stronger transparency measures for the Legislature as well as term limits and bans on outside income for its leaders — proposals that have gone nowhere during Madigan's nearly 30-year run as speaker. In that time, he has become the single biggest force in the election of the Democratic majority in the General Assembly, and his firm has become one of the most sought-after tax-appeal shops in Chicago.
"When you have someone with this much impact on major legislation, shouldn't this person find ways to shield himself from firms who are going to be powerfully affected?" said Richard W. Miller, director of the Program on Ethics and Public Life at Cornell University. "By allowing himself to remain attached to private interests — unless he is really heroic — his impartiality of course is affected."
There are other tax lawyers to see in Chicago. But nothing gets done in Springfield without Madigan, who wields unilateral control over the movement of every bill in the House.
That was true in 2005, when a coalition came to the state Legislature seeking to turn a pilot project on assisted living homes for the poor into what is now the permanent Supportive Living Program.
A founding member of that coalition was Pathway Senior Living LLC, Chicago's largest developer of such homes.
The idea was to save money by moving the most able-bodied nursing home patients into these less expensive facilities where they could get the help they need at 60 percent of the Medicaid cost to taxpayers. It was supported by advocates for the poor and politicians from both parties.
Pathway and other companies wanted to expand, but investment money and state incentives were hard to come by because of the tenuous nature of the pilot program.
At about the same time, Pathway, which has long used another law firm for all its property tax business, hired Madigan's firm for a single Chicago property. Public records show Madigan's firm filed its first paperwork on behalf of the company on April 12, 2005.
On May 20, Madigan and the House voted 113-0 to create the permanent program.
The industry boomed after the program became permanent. Pathway has since nearly doubled its facilities to 11 and collected more than $70 million in Medicaid payments, according to state records. It also has received $1.8 million in state-administered tax credits and $5.9 million in state-backed loans for affordable housing, records show
In 2006, Madigan's most-trusted lieutenant, Majority Leader Barbara Flynn Currie, D-Chicago, shepherded a new law that singled out the fledgling industry for a property tax break.
Madigan voted present, as he often does on property tax legislation.
Currie said she can remember no conversations over the bill with either Madigan or Pathway Senior Living. The company supported the change but never lobbied Madigan for it, Pathway Senior Living President E. James Keledjian said.
This year, when Gov. Pat Quinn suggested possible cuts to the Supportive Living Program as part of a long list of options to balance the Medicaid budget, Pathway was among coalition members fighting the cuts.
A lawmaker panel appointed by legislative leaders to grapple with the state's $2.7 billion Medicaid shortfall rejected Quinn's suggestion to stop development of 12 supportive living facilities that had been approved by the state but not yet built. Two were Pathway facilities and two others belong to another Madigan client that was also fighting the cuts. Pathway said it had already abandoned development for one of its facilities.
The Medicaid panel was advised by top Madigan aides and met behind closed doors. Lawmakers later told the Tribune it was a consensus decision to save the facilities.
Pathway executives say their decision to hire Madigan's firm for one project, while retaining their longtime tax lawyer for all their other properties, is unrelated to their Statehouse interests. They say they never discussed legislative issues.
"The reasons they made the Supportive Living Program permanent had nothing to do with us hiring Madigan's law firm," said Pathway President Keledjian. "It had to do with the fact that (such facilities) were saving the state money. It was good public policy. It was logical."
Keledjian said that when his company decided to go with the firm, he met with Madigan's law partner, Vincent "Bud" Getzendanner, at the firm's office.
"While I was there I met Madigan. … I have never worked with Madigan, and I have never spoken to him since. You don't think Madigan does any of the actual work there, do you?"
Other clients interviewed say they hire Madigan's firm because of its well-known tax expertise, especially the legal acumen of Getzendanner. They say hiring the firm has nothing to do with Madigan's power to affect regulation, state subsidies or tax laws.
"It has never entered my mind to call him," said Philip Mappa, president of MR Properties and a longtime Madigan tax client who hopes to break ground on his company's first state-subsidized assisted living facility next year. "We're very careful not to mix business and politics."
Madigan has many other tax clients with a stake in the ongoing Medicaid debate, including the CVS Caremark pharmacy chain. Madigan's firm has represented more than 30 CVS stores in the Chicago area in recent years.
A company spokesman said the chain hired Madigan's firm about a decade ago and lauded its tax expertise. The firm also acknowledged it has lobbied for its interests in Springfield, including on Medicaid reimbursements, but had not met with lawmakers on that issue this year.
"We have met with state legislative members in Illinois, as we do in all states, on issues of importance to the company and have met on occasion with Speaker Madigan," said Michael DeAngelis, public relations director for CVS. He would not say when those meetings happened or what they were about.
Asked whether Madigan or his staff has met with CVS, Brown said, "Not that I noticed, no."
Madigan is well-known for his cloistered management style, holding key policy meetings inside the speaker's suite of offices on the third floor of the Statehouse. When he emerges, his public statements are brief.
Each weekend, Madigan has a marathon meeting with his trusted inner circle to go over their week's assignments, set an agenda for the week ahead and "to strategize on a point of view," said Brown, who attends the three- to four-hour sessions.
Brown said that the specifics of the Medicaid debate have been a large part of these meetings, and that the speaker has been intricately involved in the process throughout, "as any leader should be." He declined to reveal the specifics of the private meetings.
Even the legislative Medicaid advisory committee meets in secret. The public is not invited to listen, no minutes are taken and no recordings made.
Asked why the public can't attend, state Rep. Sara Feigenholtz, D-Chicago, said, "No one has ever asked me that question before.
"I would have to ask (Madigan's) chief of staff what the reasons are behind that," added Feigenholtz, the ranking House Democrat on the panel.
Two top Madigan aides played key roles in the panel's efforts: research director John Lowder and former top lawyer David Ellis. After leaving Madigan's office earlier this year, Ellis returned as a $200-per-hour outside counsel.
"I know the speaker has hired him as a consultant to stay on top of how these cuts are made," said Currie.
While Currie described Ellis as Madigan's "eyes and ears" on Medicaid, it turns out he was also the speaker's hands.
As Feigenholtz presented the final product of the Medicaid negotiations for House approval in late May, she credited Ellis for writing the 450-page manual outlining how the state will cover health care for the poor in the coming year.
Pharmacies face cuts in drug reimbursements under the legislation, but lawmakers largely went with the industry's own suggestions for trimming rather than harsher proposals.
Supportive living homes and nursing homes face rate cuts, but they are lower than first proposed. The supportive living industry got some protection against potentially damaging changes in eligibility rules. And nursing homes won concessions on new rules to increase staffing.
Advocates for nursing home patients were surprised to learn that months of negotiations on new staffing rules were abandoned after the nursing home lobby went to Madigan's office.
"I know you are not happy," Michael Gelder, Quinn's senior health care policy adviser, told them in a conference call. "But I am just reflecting on the way in which these sorts of decisions get made in the speaker's office late at night."
Currie said she trusts Madigan to navigate his interests ethically.
"Generally I know he recuses himself from any vote or any involvement when there are these conflicts of interest," she said. "On the larger issues like this, I don't know that just because he might represent a hospital or a nursing home, that would preclude him from any involvement."
Mappa, the longtime Madigan client, said, "It's a fine line he walks. But I understand the question. And I understand the reason for the question. Did he get the expanded business because he is down there? Or is he down there because he got the expanded business?"
Tribune reporter Ray Long contributed.
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